Motiva on base oils allocation in US - sources

04 June 2008 22:10  [Source: ICIS news]

HOUSTON (ICIS news)--Motiva told lubes buyers it has begun an allocation programme immediately for its Group II base oils, industry sources said on Wednesday.

Three sellers, two buyers and a trader told ICIS that the allocation would amount to 85% for its low viscosity grades and 100% for high viscosity grades of Group II base oils, and is effective immediately. Buyers were told of the allocation on Tuesday evening.

A company spokesman was reached but comment was not immediately available.

Motiva’s posted price for Group II 70 viscosity base oil is $3.96/gal (€0.68/litre), according to global chemical market intelligence service ICIS pricing.

Buyers and sellers said that Group II paraffinic base oil supply was becoming increasingly tighter.

“Group II oils have become tight because refineries have been maximising fuel production as much as possible,” a refiner said. “With fuel margins high over the past few months and basestock margins low, I believe all refiners have taken that approach.”

Base oils demand jumped following news that Marathon would close its lube facility this year, and Citgo would reduce production, a buyer said.

Another seller said Motiva had been stocking up on material to get through its upcoming turnaround. The exact dates of the turnaround were not available.

But a trader said it seemed like Motiva did not have enough material to get through the turnaround, as it was seeking spot from other suppliers.

Motiva produces roughly 40% of the Group II base oils in North America, according to data from the National Petrochemical and Refiners Association (NPRA).

A power outage on Monday at Motiva's Texas refinery in Port Arthur led to a temporary shutdown of the facility, prompting fears that Group II supplies could further tighten. But by late on Monday, power had been restored and the company was working to bring production units back on line.

Industry sources speculated that the mechanical difficulties were the final straw to justify the allocation.

“The outage will make them lose six days of production, the market just can’t take any more issues,” a buyer said.

Motiva is a joint venture between Shell and Saudi Aramco.

Other major Group II sellers in the US include Chevron, ConocoPhillips, Motiva, Flint Hills, Valero and Calumet.

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By: Heather McGuire Doyle
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